Kenya Power sinks into Sh1.1 billion half-year loss
Monday February 27 2023
Kenya Power has sunk into Sh1.1 billion net loss for the half year ended December, blamed on the weak shilling and the 15 percent electricity tariff cut that was effected in January last year as a State directive.
Financial results announced Monday showed the performance dipped from Sh3.82 billion net profit that had been posted in the preceding similar period.
“This drop is attributable to increased foreign exchange losses, and the implementation of the 15 percent reduction of the end user electricity tariff as recommended by the Government in January 2022,” said Kenya Power.
The utility firm said the tariff reduction saw the basic electricity revenue drop by Sh6.69 billion, highlighting the price it paid to deliver discounted prices to consumers.
Kenya Power’s full-year earnings look set to be depressed, given that the subsidy on electricity tariffs was in place up to December before it was ended on the recommendation of the International Monetary Fund.
Operating costs increased from Sh19.1 billion to Sh21.7 billion, with Kenya Power linking it to increased foreign exchange losses arising from the revaluation of outstanding payments to power generators denominated in foreign currencies due to the depreciation of the Kenyan shilling.
The local currency has been weakening against the dollar, moving from an average of Sh117.96 at the start of July last year to close December at 123.37. The shilling is now averaging 126.61 to the dollar.
Revenue from contracts with customers dropped from Sh83.57 billion to Sh86.67 billion, while the cost of sales —linked to units of electricity purchased and from power distributors and sold to customers— increased from Sh55.3 billion to Sh66.1 billion.
The rise in the cost of sales amid a drop in revenue saw the gross margin fall by 27 percent to Sh20.6 billion from Sh28.3 billion.
Kenya Power says the dip in revenue was despite a four percent growth in electricity sales to 4,764GWh for the period.
“The growth in sales was driven mainly by growing energy demand occasioned by increased economic activities and an expanded customer base,” the utility said.
Read: Electricity prices drop marginally in February
Non-fuel power purchase costs increased from Sh40.5 billion to Sh43.9 billion owing to additional electricity purchases made during the period to support growth in demand.
Fuel costs also increased from Sh10.87 billion to Sh15.08 billion, attributable to the significant increase in fuel prices during the period under review.
Finance costs associated with servicing loans increased to Sh7.39 billion from Sh6.8 billion resulting from a rise in unrealised foreign exchange loss as the shilling lost ground against the dollar.